South African producer prices for all commodities rose by 1,9% in the 12 months to the end of December, from a 2,5% increase for the 12 months to the end of November, Statistics South Africa said on Thursday.
On the month, the producer price index (PPI) was down by 0,5% compared with November’s 0,2% monthly rise.
Dawie Roodt, chief economist at the Efficient Group, said: “This is a very, very low number — I think it is a real surprise. We had a much higher number and ours was on the optimistic side. It means that inflationary pressures from the supply side will be muted, so inflationary expectations on the consumer side will have to be moderated. The [South African] Reserve Bank should cut rates on this.”
Mike Schussler, economist at T-Sec, commented: “This is an excellent figure and bond yields are bound to drop. The figure is also good for the rand and enhances the probability of an interest-rate cut in February by the [Reserve Bank’s] monetary policy committee. We are looking at much lower inflation picture in 2005 on the back of this figure.”
George Glynos, market analyst at Econometrix Treasury Management, said: “The PPI figure was a very good number due to the lower imported commodities, and the effect of the strong rand also followed through. This figure raises the prospect of a 50-basispoint rate cut in February, as pipeline pressures are very benign.”
Said Dennis Dykes, chief economist at Nedcor: “The figure is better than expected. I think PPI will remain modest over the next few months and even if does pick up, the movement is likely to be very much contained.”
Annabel Bishop, economist at Investec, commented: “PPI inflation came out below expectations on lower oil and petroleum prices. We expect PPI inflation will rise to 4,4% by year-end on the back of mild rand weakness. We still forecast that interest rates will remain unchanged over most of 2005, with a 50-basispoint cut occurring in April.” — I-Net Bridge